Living on a Budget

How to Cut Termination Fees

Some striking examples of poor customer service come from companies that hold you hostage with outrageous early termination fees (ETFs). While I understand that service providers—cell phone, landline, cable, and satellite TV outfits among them—may need to recover the cost of equipment or installation if you cancel early, there are times when the fees are just plain silly.

For example, my 11-year-old son recently approached me about getting a cell phone. Turns out that I could add one for him to my current service by making a yearlong commitment at only $10 a month. Not bad. Yet the ETF on what amounted to a $120 contract was $175. What made it totally ludicrous was that I had provided the cell phone. The company had no initial cost to recover!

Quite a few of the complaints in the On Your Side inbox have to do with ETFs. While new rules have been proposed in Congress to limit the fees, carriers are showing little mercy—Verizon just announced an ETF for its most advanced devices, including the new Droid smartphone, that decreases by $10 a month. But the fee starts at a breathtaking $350.

You're not defenseless, though. Should you dare to bail out of a service, you may be told initially that "a contract is a contract" and that you owe the full amount. That's when you need to employ a little logic to avoid paying most of what the agreement demands.

A case in point: A friend of mine named Coleen from Eugene, Ore., recently moved and needed to change landline phone carriers. When she called to cancel the old service, she was told that she'd have to pay the $200 ETF because she still had six months remaining on a two-year contract. That's when she asked my advice.

I suggested she call the phone company back and ask them to prorate the ETF, based on the fact that she was three-quarters of the way through her agreement. This is the same formula proposed in a Senate bill that addresses cell phone fees, and it worked for Coleen. With a single phone call, she was able to save $150.

You can, too. If the first customer service representative doesn't respond to reason, don't give up. Ask for a supervisor, and then that person's supervisor if need be. Chances are good that you'll eventually encounter someone who's willing to grease the squeaky wheel.